FP Carmignac Emerging Markets

China’s weak economy remains a burden, as reflected in the publication of lower retail sales and a fall in the NBS manufacturing index.

May was also notable for elections in a number of countries (India, South Africa and Mexico), which seem to have increased regional volatility.

Brazil’s central bank cut its key interest rate by 25 bps, as opposed to the 50 bps that had been expected, weighing on the national currency and markets.

Emerging markets were down over the month as China and Brazil underperformed.

The Fund posted a negative return in May, as did its reference indicator.

MercadoLibre of Brazil was the main contributor to the Fund’s performance after it published good results for the last quarter.

The Fund’s most costly positions were in South Korea: Hyundai Motor, Samsung Electronics and LG Chem.

Latin American stocks such as Eletrobras, Grupo Banorte and Equatorial Energia were down too.

We are keeping a significant allocation to Chinese markets, taking advantage of market inefficiencies and the upside potential for companies with strong balance sheets and valuations that do not fully reflect their fundamentals.

After Chinese stocks rallied, we took some profits on stocks that had performed well, like Miniso, New Oriental.

We increased our exposure to Vipshop, which is lagging well behind other internet stocks and is now one of our top 10 positions.

Before the announcement of India’s election results, we also strengthened our position in real estate management company Embassy Office Parks.

We are remaining exposed to Latin America, and Mexico in particular, which is benefitting from structural trends such as reindustrialisation in North America.

We are keeping a concentrated portfolio balanced between growth and discounted stocks, with a particular emphasis on valuations and sustainability criteria.